Posts Tagged ‘investment’

The Israel on Campus Coalition announced a new partnership with the student-run TAMID Israel Investment Group, connecting American business students with business and investment opportunities in Israel.

The program began at the University of Michigan in 2008 and is now estimated to have 300 members at UC Berkeley, Brandeis University, Harvard University, University of Maryland, University of Illinois, University of Miami, University of Michigan, Penn State University and the University of Southern California.

TAMID makes participants managers of investment funds or consultants for Israeli startups after a semester of educational seminars. Students complete the program by interning in Israel with the TAMID Fellowship Program.

As a financial planner, I often ask new clients why a particular investment is included in their portfolio. One answer that I find somewhat worrying is: “I don’t really know how to explain it, but I just had a gut feeling that this stock was going to be a winner!”

Often the stock in question is anything but a winner, but that isn’t the point. If you were to fit a new kitchen, would you simply walk into a builder’s showroom and say that you wanted the kitchen cabinets that are in the storefront window because you had a “gut feeling” about them as soon as you saw them, or would you first visit several showrooms, research the types of materials used and other factors that are important to your decision? Of course you wouldn’t order home renovations based on gut feelings, because thousands of dollars are at stake, as well as the fact that you will have to live with the results of your decision for a very long time. Just like investing.

The way that emotions affect investing has become a science and much research is conducted into various phenomena such as loss aversion, mental accounting, and herding. Emotions influence investors’ decisions in many more ways than you would expect. Sometimes fear drives an investor to sell a stock because a sudden dip in the market makes him afraid he’ll lose everything. And, at the other end of the spectrum, is the person who did well with a certain small investment, and figures that because he did well once, he’s bound to do even better if he does it again. He continues to invest in something that might not be appropriate at increased levels, just because he wants to duplicate his previous “win.”

On my radio show, Goldstein on Gelt, I interviewed several researchers who study behavioral investing, including Professor Terrance Odean of Berkeley University, Nobel Prize Winner Professor Daniel Kahneman, and best-selling author Professor Dan Ariely (click on their names to watch videos of these interviews). Watch the videos and let me know if the research on behavioral finance jives with your investment decisions.

As a financial adviser I notice that certain money mistakes are very commonplace. Are you making these kinds of errors that can destroy a fortune?

Instead of learning from your own mistakes, try learning from other people’s mistakes. Below is a list of some of the most common mistakes in financial planning:

1. Putting off buying life or health insurance. Even if you are still young and you belong to the mindset of “it will never happen to me,” the truth is that you never know. Accidents, terror attacks, and sudden illnesses are all in the hands of the One Above, and although no one should ever go through life in a constant state of fear and worry, it’s important to be prepared for any eventuality. Think of your insurance policy as “risk management.”

2. Passing up tax breaks. When considering whether to buy or sell an investment, don’t only look at the figures. Find out what this means in terms of tax. How will the dividends/interest be taxed? Does the investment have any kind of tax deferral or tax-free status? While tax status shouldn’t be your sole concern in purchasing investments, make sure to keep tax liabilities in mind.

3. Buying or holding stocks for the wrong reasons. Are you holding onto a stock out of sentimental reasons, because you inherited it from a loved one? Are you thinking of buying a stock simply because you enjoy the company’s products? Don’t base your decisions on emotions. Do your homework, and only buy the stocks that make the most financial sense for you. If you are not sure how to work this out, consult with a financial planner.

4. Not taking enough risk. Some people are very cautious by nature, and they would prefer to invest their money with the least risk of loss. Although this might sound prudent because it minimizes the chance of loss, the other side of the equation means that your gains will be limited. Of course, the appropriate level of risk for you depends very much on your personal situation, so speak to your financial adviser about what is appropriate for you.

One of the main headlines in world financial news this August has been the fate of ZeekRewards.com, an online company that offered investors the chance to get rich quick. Interestingly enough, I heard about ZeekRewards before this company hit the headlines, when one of its salespeople contacted me and asked me to represent them. The very pushy salesman nagged me to set up a meeting, but the more he pushed me, the more uneasy I felt. So I decided to follow my mother’s adage of, “If it sounds too good to be true, it probably is,” and I didn’t meet him.

Reading the headlines, I’m very relieved with my decision. ZeekRewards offered promises of returns such as 1.5% of the investment at the end of each day and shares of 50% of the daily profits. Wouldn’t everyone want that kind of deal? However, this August, the Securities and Exchange Commission (SEC) filed an emergency action in a North Carolina federal court because this investment project was yet another Ponzi scheme.

The owners of ZeekRewards must have realized that many of these potential investors were going to ask questions. So, in a bid to protect themselves they added a clause for new users stating that they were not purchasing stock or any kind of “investment or equity,” and they even labeled the whole thing as an “e-commerce subscription.” The SEC saw through their ruse and said that this was not the case and in fact the company was offering its subscribers false securities. However, the average investor did not have the knowledge to understand what they were getting into, and the abovementioned clause probably sounded fair enough.

As people kept subscribing and playing the company’s game, investing and reinvesting, the company’s cash outflows began to exceed its total revenue, leading to a collapse and many unhappy subscribers who were left with nothing.

This time, there are more than 1 million victims of the scheme, making this the largest such bankruptcy case, with around $600 million at stake.

Interestingly, many observant Jews, both in Israel and America, have fallen prey to this scheme. It’s not the first time that Jews have been hit hard by Ponzi schemes (think Madoff).

This raises the question of why Ponzi schemes such as ZeekRewards are tempting to the religious Jewish community. One possible answer is that many religious Jews have large families and in this economic climate finances may be tight. Offer a person who is trying to find legitimate ways to support his family a way to make some extra money, and it’s tempting to find out more.

Sadly, as stated above, ZeekRewards is not a one-off story. Apart from desperation to make more money, another possible reason people fall for these schemes is that the scammers may have gotten smarter.

However, there are three basic measures that you could follow to protect yourself from falling victim in a financial scheme:

1. Remember my mother’srule: “If it sounds too good to be true, it probably is.” ZeekRewards offered high gains for pressing a few buttons and looking at some ads. This is the first sign of something suspicious. When something sounds too good to be true, ask yourself, “What’s the catch?”

2. Do your research. One potential investor who decided against investing with ZeekRewards said that when he heard about it, he did his homework. He discovered that the company’s securities offerings were not registered with the SEC as required by U.S. federal law. Recognized authorities monitor investments for a reason; their absence speaks volumes.

3. Don’t feel pressured. If the company/salesman/friend keeps nagging you, saying that the investment opportunity will be gone if you don’t “buy now,” it may be wise to let the opportunity pass.

While there are no guarantees in the world of finance, taking these three steps will provide a basic level of protection against becoming a victim of the next Ponzi scheme that rears its ugly head.

If you are interested in hearing more about the biggest investment fraud in history, watch this TV interview that I did on the subject of Bernie Madoff. Although this was four years ago, the points remain the same. If anything, there are more frauds out there and we need to be more careful than ever. So be wary and tread with caution.

The sale of a 185-room hotel at the entrance of Jerusalem on August 16 was not just a 17.5 million dollar real estate acquisition by Australian multi-millionaire Kevin Bermeister, but one investment in a broader and more calculated strategy to make Jerusalem a global tourism capital.

In an interview with the Jewish Press’s Yishai Fleisher, Bermeister, founding investor in Skype, founder of file-sharing network Kazaa, and builder of Australia’s largest video game distributor, discussed Jerusalem5800, his $30 billion dollar, 28 year project to revolutionize the city and quintuple its number of annual visitors.

“I’ve been coming to this city for 7 or 8 times 5 or 6 times a year… I’ve been walking the streets learning about the city and I’m fascinated by it, I love learning the I love the history, I love the archaeology, I love the Jewish culture, I’ve become more religious, there’s many, many aspects to my fascination with this city,” Bermeister told Fleisher. Yet the fact that history and culture-rich Jerusalem has not advanced into a world class city the likes of New York City or Paris bothered Bermeister. And he decided to do something about it.

Together with a team of activists, engineers, architects and environmental and demographics experts, Bermeister began work on a grandiose vision for the modern-ancient city, and entitled it Jerusalem 5800, after the beloved city and the turn of the Jewish century which will occur in less than 28 years on the Jewish calendar.

Much of the plan, made public at Jerusalem5800.com, revolves around taking the visitor on a historic progression through the city, starting in the west and working toward the south – which means redefining the entrance to the capital.

“I am a personal fan of the city reorienting its entrance from the west towards the south. I think the south is the traditional entrance to the city from the time of Abraham, and in fact, it’s the right approach for tourists who are coming here to learn about the city,” Bermeister said. “If you approach the Old City from the south, you begin your journey three and a half thousand years ago, and as you progress up towards the north, towards the Western Wall, the Kotel, you arrive at a period two thousand years ago, and then you can progress to the modern city which is of course in our present day.”

When they come, tourists of Jerusalem in the year 5800 (2039 on the Gregorian calendar), will enjoy an advanced public transportation system and will benefit from significantly more travel accommodations.

“I realized that industry here has not really fully developed, it’s not catered to the extent that it is in other cities, and I started to look at tourism specifically… in the last 10 years, only 300 hotel rooms have been built. Once I discovered that fact, the light bulb went off…”

That burst of inspiration was partly the realization that investors stand to gain tremendous amounts by buying stakes in everything to do with Jerusalem tourism – particularly hotels which Bermeister hopes will house 10-12 million visitors a year by 5800, up from the current 2-3 million.

Bermeister is the first to admit that many of the projects Jerusalem 5800 are focused on making a profit for investors.

“The Leonardo hotel, for example, was one of those properties that we identified early. At the entrance to the city, adjacent to large zoning changes in Binyanei HaUma – which has recently been announced by the city – that would increase the density of building and perhaps provide us the opportunity to increase the density of zoning on our property and therefore improve the return on investment to our investors,” Bermeister said.

“[Jerusalem 5800] is a private/public partnership plan, and we’re trying to… develop the city into the future based on the prioritized return on investment to investors. So [we’re focusing on] those projects that will be most interesting to investors the soonest.”

The hope is that more money will mean more progress for Jerusalem. Jerusalem 5800 aims to “continue to encourage the development of a fund that would be supported by many more investors around the world who could put their funding and finance concentration into Jerusalem and into Jerusalem building,” said Bermeister.

But Jerusalem 5800 is not without its challenges. Progress can be halting because of Jerusalem’s atypical status under the jurisdiction of both the city’s mayor and the prime minister of Israel. The interests of various ministries and planning authorities must also be taken into consideration.

Not to mention the will of God. “Everything we do anticipates a possible future – please God, there will be a Temple and people will come three times a year to Jerusalem,” Bermeister said.

“But the 28 year plan really focuses on the what we know and what we can do something about in physical terms in the city today. Preparation of the city, taking advantage of the existing growth in global tourism, for which Israel is not obtaining its market share, and really to focus on making sure that we do obtain our market share of inbound tourism by addressing the issues of the Jerusalem city center and access to the Holy Basin.”

“So like Jews around the world who pray three times a day and sometimes a lot more, that the Temple will in our lifetimes become a reality, [the Temple] would become an amplification, a significant amplification of the present planning,” Bermeister said. “But in any event, 5800 would enable that thinking and enable us to cope with that amplification….it also looks to the future and hopefully will enable the city to be ready for an event such as the Temple.”

“I’m looking forward to a very bright future and I think Israel and Jerusalem are key to the examples that … Jewish people can set in the world, the way of thinking, the way of acting, and I think we have a responsibility to project in the world the way to make the world a better place.”

The hi-tech innovator’s plans, already 2 years in progress, include a Jerusalem regional airport in the Judean desert near Jericho, and underground traffic systems with service to the Old City.

The committee for permits in the state comptroller’s office has allowed Prime Minister Benjamin Netanyahu on August 15 – at his own request – to make changes in his investment portfolio, both overseas and locally, in addition to changes made in the beginning of his present term as prime minister in 2009, Globes reported. Netanyahu made his request through attorney David Shomron.

The committee’s decision stated that “It seems that due to drastic changes in the world economy, as well as frequent and significant shifts in investments within Israel, there is a need to allow additional guidelines for the trustee in charge of the blind trust—in accordance with the government’s decision.”

Committee members also pointed out that “it appears that the requested changes are necessary due to changes in the economic reality.”

On October 10 the government will convene to confirm Netanyahu’s request to make the changes in his investment portfolio, after which the comptroller’s permit committee will approve the request.

Netanyahu’s current request comes in the wake of threats by the PM and his Defense Minister Ehud Barak to attack Iran’s nuclear facilities in the near future.

Former Joint Chief of Staff Dan Halutz got into hot water when he sold his investment portfolio in the summer of 2006 on the day that the second war in Lebanon broke out. He was badly criticized by the press and the public for what appeared to be his attempt to profit from the shift in political events.

In contrast, Netanyahu’s financial move was done in full transparency and in complete adherence with legal procedure.

There was no reaction from the Prime Minister’s office to the Globes story.

UPDATE: Later today it was publicized that on August 22 Netanyahu decided on his own to pull back his request, in order to avoid the appearance of impropriety.

Are you looking for a good way to invest your money? If so, you might consider mutual funds. A mutual fund is essentially a collection of stocks and/or bonds that is shared by investors. Everyone puts his money into a “basket,” and each person owns a proportional percentage of the overall mutual fund. Each mutual fund has managers that are in charge of the buy-and-sell decisions, so all the investor needs to do is put his money in and wait/hope to earn some profits.

Four reasons investors choose mutual funds are:

-It takes the work off your shoulders — why spend time going through rows of figures and researching the performance of your securities when there are professional money managers who can do this for you? In fact, not only do they save you the work, but they can possibly do it better.

-”Don’t put all your eggs in one basket,” or in financial terms, diversification. Diversification is a technique where you spread your investments among various companies, industries, and geographic locations, thus minimizing your risk if something fails. For example, if you were to put all of your savings into Brazilian coffee and a huge flood wiped out the entire coffee bean crop across South America, you would be left with nothing. But if you diversify, you are less likely to lose everything. Putting your money into mutual funds, which by their very nature are diverse (though some do stick to certain sectors or countries), saves you the headache of searching for the best way to spread your investments.

-Mutual funds are not only good for the big guns. If you only have a little bit of money you can still invest. Unlike some professional money managers who may have minimum account size requirements to manage your money, mutual funds offer professional management without investment minimums (other than buying one share). In this way, mutual funds may be an affordable way to get professional guidance and diversification.

-What if you suddenly need your money? Mutual funds are fairly liquid. You can redeem your shares at the current NAV —along with any fees and charges assessed on redemption — at any time.

If you think investing in mutual funds may be for you, learn more at www.LearnAboutInvestments.com, and then schedule a meeting with your financial adviser.